Falling savings rates could increase risk of debt

5 November 2009

Personal finance website Moneyfacts has claimed that one in ten variable-rate savings accounts have had their rates cut since the beginning of March.

10.1% of these accounts have had their rates reduced since March, when the base rate was cut to a record-low 0.5%.

Meanwhile, just 3.5% of accounts have seen their interest rates increase in this time.

A spokesperson for debt management company Gregory Pennington said that by discouraging saving, falling rates could increase the risk of debt.

"Savings are not just security for the future - they also offer short-term protection against unexpected costs, and can help people to stay out of debt if any financial emergencies arise. Lower rates simply mean fewer people are inclined to put money into savings.

"It`s important to remember that earning interest isn`t the only reason to save. Anyone who is in the position to do so should try to make regular savings to protect themselves against debt - even if the rates are lower than in the past."

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Gregory Pennington offer debt management plans as well as a range of other debt solutions. If you are worried about debt, contact one of our expert debt advisers now.

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